Over the past six months we have seen dramatic changes to the way audiences are accessing and engaging with media content. This period represents a pronounced progression of a wider multi-year trend in media consumption. The rollout of new services, the availability of more device options than ever and an increasing consumer apathy to channel bundles have irrevocably changed the media landscape, leading to a major disruption of the pay-TV market.
A January 2020 report from Wall Street analyst firm MoffettNathanson estimated that the US pay-TV sector is witnessing an annual decline rate of 7.6%. There are now as many non-subscribing pay-TV households as there were pay-TV subscribers in 1988. The dramatic interruption by the COVID-19 pandemic is likely to be the final straw in this evolution, with the ‘new normal’ helping to accelerate the traditional speed of transition.
After all, if necessity is the mother of invention, perhaps one could say that progress is the child of disruption. All broadcasters, content owners and traditional pay-TV operators are now evaluating their existing technologies and business strategies to see how they can best meet the demands of today’s audiences.
Pay-TV to OTT – the Media Industry today
While the total watch time of media content may not be decreasing, the ‘where-and-how’ is changing dramatically, and the multitude of streaming services are continuing to rapidly gain new subscribers. High quality, original and compelling content from the likes of Netflix and Hulu continues to dominate the field, with new market entrants – such as Apple, CBS, Disney, Warner and more – continuing to deliver highly prized, original independent content. What’s more, the consumer shift towards second screen viewing on mobiles and PCs is further driving the push towards anytime, anywhere viewing.
There are several factors that have led to this market overhaul, most notably the change in how consumers are accessing content. Evolving preferences from largely linear viewing to more flexible, time-shifted and on-demand services has changed the game for traditional TV operators. Consumers are now looking to access their favorite live and on-demand content through home internet, connected TV, streaming devices and mobile video offerings.
If the media industry wasn’t already in enough of a state of disruption, the COVID-19 pandemic has thrown a major curveball. Prior to lockdown, US viewers were spending close to five hours per day on AVOD or TVOD services alone, according to the Nielsen Total Audience Report. This was not just a US trend – Italy and South Korea also saw increased media consumption of 9% and 17% respectively. Indonesia topped this list, with a huge 35% increase in media and entertainment consumption in March and April 2020. While these statistics were born from the COVID-19 crisis, it is likely that they represent a longer-term trend.
With shelter-in-place orders encouraging consumers to access content according to their own schedule, there has been a significant surge in streaming consumption. Combined with an increase in high-quality content becoming available, content owners are now increasingly looking to embrace direct-to-consumer (DTC) models to reach consumers.
Delivering a modern media experience
Some significant technology investments are needed from operators in order to maintain an efficient and reliable service that can be adapted and customized, similar to the way DTC models can easily cater to consumers.
Firstly, it’s important to ensure that all devices are enabled as an equal partner in the content consumption process. Big strides have been made towards realizing this, but in too many scenarios pay TV providers have separate systems for delivering to tablets, phones and smart TVs. By having siloed services, it becomes very difficult to provide a consistent service and consumer experience.
By developing a common service, operators can deliver a constant video quality to individual types of devices. This is best done by developing a deep understanding of your consumers, and knowing how best to segment them into consumption approaches and needs. Then, you can tailor a particular service that is preferable to them.
Flexible pricing is another important element in the modern consumer experience. Operators need to understand when a product should be offered via an advertising-based model, as a subscription, or a one-off purchase. To do this, it is again crucial to understand the needs of your customers and then offer the appropriate payment models accordingly.
Thirdly, having a platform with the scalability to address potentially tens of millions of people across one backend is vital. Live delivery poses a big challenge here, being one of the more complex parts in the delivery of a consistent consumer experience. To achieve optimal live video quality, operators must be able to adapt bitrates according to the complexity of the video quality, meaning the same end-quality can still be achieved regardless of broadband bandwidth availability.
Embracing the Cloud
Adopting a cloud-native approach is the best way to overcome these challenges. Cloud-native platforms are built in a way that meets the reliability requirements of a modern entertainment system, enabling multi-regional deployments across multiple providers that are personalized to each subscriber segment. This flexibility is needed in order to maintain the required levels of availability, scalability and reliability. By embracing the cloud, TV operators and OTT players can now roll out new content offerings and connect with hundreds of millions of media consumers.
The MediaKind application paper, ‘Getting your Disruption on: Uncovering Media Opportunities’, is now available to download, and lays out a new example of a scalable, cloud-based OTT platform that launched new services on existing infrastructure, driving additional revenue and increasing conversion to recurring services. Whether a start-up or traditional player, the challenge for the industry today is to find new methods and applications to leverage and benefit from the efficiencies of the cloud. Cloud technology is enabling pay-as-you go resources to be used to scale up and down as needed, while new focused services can be launched for sporting events, concerts and other specialized genre specific services.
I recently hosted an IABM webinar with my MediaKind colleague Lisa Aussieker, where we explored the findings of this paper and what it all means for the future consumer experience – click here to watch the webinar on-demand: Watch Now